OTTAWA — The federal government has cancelled a controversial Arctic surf clam licence that was intended to help Indigenous communities gain a foothold in a lucrative fishery, but instead led to criticism from First Nations and an investigation by the federal ethics watchdog.

The fisheries department announced on Friday that the new licence, which would have awarded one quarter of the existing surf clam quota to an Indigenous partnership, was cancelled in early July.

That 25 per cent quota will likely now revert to Halifax-based Clearwater Seafoods, which holds a monopoly on the fishery. Surf clams are a popular sushi ingredient in Asia, and the company’s 2016 revenue from surf clam sales was nearly $92 million.

“This would allow for the economic benefits to remain in coastal communities while Fisheries and Oceans Canada continues to work to broaden access to this fishery,” the department wrote in a news release.

A spokesperson for Fisheries Minister Jonathan Wilkinson declined to say why the licence was cancelled, citing confidentiality, but said an explanation has been shared with the proponent — Nova Scotia-based Premium Seafoods and the Five Nations Clam Company, headed by Chief Aaron Sock of the Elsipogtog First Nation in New Brunswick.

Premium Seafoods CEO Edgar Samson did not immediately respond to requests for comment.

In February, then-fisheries minister Dominic LeBlanc announced he was awarding the licence to Five Nations, a new entity comprised of Indigenous communities from the four Atlantic provinces and Quebec. At the time, he called the decision “a powerful step toward reconciliation.”

But it was soon revealed that Five Nations didn’t have all five partners confirmed by the time it won the licence, even though the government required that the winning bidder be a partnership of multiple Indigenous communities. First Nations in Nova Scotia and Newfoundland that had submitted bids of their own were quick to criticize the process, and Newfoundland fisheries minister Gerry Byrne said Ottawa’s handling of the decision was “anything but reconciliation.”

The federal Conservatives later took up the cause, accusing the Liberals of having suspicious ties to the winning bidder. For one, Samson is the brother of Nova Scotia Liberal MP Darrell Samson. The cousin of LeBlanc’s wife, Gilles Thériault, was also involved with Five Nations.

At the Conservatives’ request, in May ethics commissioner Mario Dion launched an investigation of the decision under the Conflict of Interest Act.

Still, it remains unclear whether the process was actually flawed. A legal challenge of the decision launched by a Newfoundland First Nation was dropped in June after court documents revealed that Five Nations did have one additional partner in place when it applied. According to Shayne McDonald, legal counsel for the Miawpukek First Nation, that meant the company had met the government’s criteria.

It’s a reprieve for the time being

Despite its decision to cancel the licence, the government seems not to have given up on its goal of opening up the surf clam fishery to Indigenous participants.

It plans to start a new process in the fall, and to select a licence holder in the spring of 2019, to begin harvesting clams in January 2020. This time, however, an independent third party will be hired to make recommendations to the fisheries minister.

“The approach we have announced will allow existing interested parties to update their submissions or reconfigure their partnership structure, while allowing any new potential participants to signal their interest,” said spokesperson Laura Gareau in an email.

On Friday, Clearwater welcomed the announcement and said it’s ready to harvest the remaining 25 per cent of the quota. The company says it employs 450 people year-round from 52 communities in Nova Scotia and Newfoundland, and had warned it might have to cut jobs or hours if it lost part of the quota, including at its processing plant in Grand Bank, Nfld., the centre of its surf clam operation.

“I’m certainly pleased to see the announcement,” said Christine Penney, vice-president of sustainability and public affairs. “It will give a lot of comfort to our employees.”

Grand Bank Mayor Rex Matthews also welcomed the announcement, but said he’ll continue to lobby the minister to prevent job losses in his community.

“It’s a reprieve for the time being,” he said. “The reprieve is going to be short-lived.”